LSU study: Slew of investments fueled by recent discoveries

Recent natural gas discoveries have helped spur $62.3 billion in manufacturing investments planned for the next five to eight years in Louisiana, with $20.2 billion of that figure directly impacting the state’s economy if the projects are completed, a study shows.

The study by LSU’s Center for Energy Studies notes that much of the capital expenditures associated with large projects occur in other states. The study released Tuesday was commissioned by a national natural gas industry association.

“Unconventional Resources and Louisiana’s Manufacturing Development Renaissance,” which was conducted by David Dismukes, the center’s associate executive director, found that the “construction of the recently-announced natural gas-induced projects is estimated to generate an economic benefit of over $29.7 billion in economic output over a nine-year period (2011-2019), a cumulative increase of some 214,670 job-years, and $9.3 billion increase in wages over a nine-year construction period.”

The projects, most of them to be located in south Louisiana, include more than $22.5 billion in output, almost 160,000 in job years and $7.4 billion in wages.

The study noted that for much of the last decade the price of natural gas averaged about $5.88 per million British thermal units and in many instances exceeded $10.

“During this period, the volatility of prices doubled, making natural gas an exceptionally high-cost energy resource for U.S., and in particular, Louisiana manufacturing,” the report said.

Manufacturing, which relies heavily on natural gas for heat, steam, power generation and as a feedstock, slowed down accordingly. In 2007, for example, chemical industry employment was 60 percent of its 1998 peak, the report said.

“At the time, U.S. natural gas prices were considerably higher than many other places in the world creating considerable competition issues and incentives for offshoring and redirecting new incremental investments away from the Gulf of Mexico region,” the report said.

But beginning with the last recession and aided by the discovery of unconventional reserves, such as the Haynesville Shale in northwest Louisiana, natural gas prices have stabilized between $3 and $4 per MMBtu.

“This change in price comes from the development of unconventional gas reserves located throughout the U.S.,” the report says. “Many credible resource estimates suggest at least 100 years of U.S. natural gas supply from these newly discovered resources.”

Louisiana onshore gas production has been increasing by an annual average of 34 percent since 2008 and is currently at levels not seen since the 1970s. North Louisiana natural gas production — DeSoto, Red River, Sabine and Caddo parishes — has almost entirely replaced the contribution made by south Louisiana natural gas production, the report said.

These estimates have helped fuel the slew of projects announced in recent years, which have included liquefied natural gas export terminals, $19.5 billion; gas-to-liquids facilities, $22.5 billion; ethane crackers and polymer plants, $14.8 billion; and methanol and ammonia plants, $3.1 billion, the report says.

This investment, the report said, represents “one of the largest, most concentrated levels of capital expenditures in the state’s history,” mostly in the southwest and south-central portion of the state.